Rising Rates, Costs Catch Up With The MOB Development Market

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Although 2022 was generally considered to be a tough year for healthcare real estate developers – the result of rising construction costs and inflation – the amount of medical outpatient building space started or completed fell only 1.1 percent from the previous year.

That was indeed a bit of a surprise last year when the Arnold, Md.-based research firm Revista issued its 2023 Outpatient Real Estate Development Report, which indicated that the volume of MOB projects started or completed in 2022 totaled 44.9 million square feet in 2022, down slightly from the 45.4 million square feet of space started or completed in 2021.

However, it looks as if increasing costs, rising interest rates, harder-to-obtain debt and financially challenged health systems caught up with the MOB development business in 2023.

The newly released 2024 Outpatient Real Estate Development Report provides a wealth of information on medical office and other outpatient properties started and completed in 2023 by third party developers. The report provides a ranking of total number of projects, total square feet and total construction value for the top developers.

 

Source: HREI

Sila Realty Trust, Inc. Completes Acquisition Of $85.5 Million Healthcare Portfolio In Arizona And Texas

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Sila Realty Trust, Inc., a net lease real estate investment trust focused on investing in high quality healthcare properties across the continuum of care, just announced the acquisition of five Class A healthcare facilities located in Arizona and Texas, for a contract purchase price of $85.5 million.

The Portfolio is comprised of four built-to-suit micro-hospitals and one freestanding emergency department, totaling approximately 158,000 square feet on a combined 17.5 acres. Each of the micro-hospitals is licensed for 8-inpatient beds, and offers a 13-bed emergency department, operating room, laboratory, diagnostic imaging suite, and a pharmacy. The freestanding emergency department is a 13-bed full-service emergency center, constructed to also offer the same services as the micro-hospitals.

The Portfolio is 100% leased by Tenet Healthcare Corporation, one of the nation’s largest healthcare systems, with over 15,000 licensed beds, which designed and developed these facilities from 2019 through 2021. Each property is operated under the name of the local affiliated hospital brand of Tenet.

Two of the micro-hospitals are in the Phoenix-Mesa-Chandler, Arizona metropolitan statistical area and operate under the brand of Abrazo Health. One micro-hospital and the freestanding emergency department are in the Tucson, Arizona MSA and operate under the brand of Carondelet Health. The additional micro-hospital is in the McAllen-Edinburg-Mission, Texas MSA and operates under the brand of Valley Baptist Health. Tenet strategically chose each of these locations due to its belief that each exhibits strong population density and demographics, and positive growth characteristics.

“We are pleased to announce the closing of this portfolio of properties which are emblematic of the healthcare facilities that Sila Realty Trust is focused on acquiring – high quality, well located, strong credit tenancy with healthcare system affiliations,” stated Michael A. Seton, President and Chief Executive Officer of the Company. “This acquisition demonstrates our ability to source property and invest capital in what we believe to be an accretive manner to the Company while others remain on the sidelines.”

About Sila Realty Trust, Inc.

Sila Realty Trust, Inc. is a net lease real estate investment trust headquartered in Tampa, Florida, with a strategic focus on investing in the significant, growing, and resilient healthcare sector of the U.S. economy. The Company invests in high quality healthcare facilities along the continuum of care, which, we believe, generate predictable, durable, and growing income streams. Our portfolio is comprised of high quality tenants in geographically diverse facilities which are positioned to capitalize on the dynamic delivery of healthcare to patients. As of December 31, 2023, the Company owned 131 real estate properties and two undeveloped land parcels located in 62 markets across the U.S.

 

Source: HREI

For Profit HCA Florida Beefing Up Competition In Southwest Florida To Publicly Run Lee Health

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HCA Healthcare is expanding its presence in Southwest Florida and competing with the dominant health system, the publicly operated Lee Health.

The ongoing expansion of the for-profit HCA will include a 100-bed hospital at 3851 Colonial Blvd. that is in planning stages and a freestanding emergency room under construction at 8919 College Pointe Court.

The increasing competition from HCA is among the reasons why Lee Health is considering converting from a public system to a private nonprofit one. The change would provide leverage to partner with other health care systems and would allow Lee Health to go outside of the county. Lee Health’s publicly elected board will make a decision by October on a conversion or not.

In 2006, HCA sold its two hospitals in Fort Myers to Lee Health; Southwest Florida Regional Medical Center that no longer exists and Gulf Coast Hospital that has been renamed Gulf Coast Medical Center at 13681 Doctors Way off Daniels Parkway.

What Does HCA Own In Southwest Florida?

HCA’s main presence in Lee is through ownership of eight MD Now Urgent Care locations, including one in Naples. The locations are in Fort Myers, Cape Coral, Harlem Heights, Lehigh Aces, Estero and Naples. HCA bought MD Now, which has 59 locations in the state, at the end of 2021.

The company is building a freestanding emergency room in Fort Myers at 8919 College Pointe Court with an estimated cost of $6.5 million, according to Lee County records.

“HCA Florida Fawcett Hospital, located in Port Charlotte, is involved in the project,”  spokeswoman Debra McKell said in an email. “This 10,820-square-foot facility will operate around the clock with full-service emergency services including laboratory, X-rays, CT scanning and ultrasound. We recently held a beam signing event at the location and are expecting it to open in fall 2024.”

HCA Fawcett Hospital opened a similar freestanding emergency room in Cape Coral in June 2022. The address is 322 SW Pine Island Road.

What’s The Status Of The New Hospital?

The hospital will be built at 3851 Colonial Blvd., which is just northeast of McGregor Baptist Church.

“The details are being finalized after the site had to be rezoned and some mitigation had to be done,” McKell said.

She did not immediately have a time when construction will start.

When HCA announced in 2021 plans for the hospital, officials said it would be four stories with 275,870 square feet and would include an emergency room, trauma care, labor and delivery, among other services.

The Fort Myers hospital is one of three planned as part of HCA’s market expansion in the state. The other two are a 90-bed hospital in Gainesville and a 60-bed hospital near the Villages. Statewide HCA Florida has 49 hospitals and 65 urgent care centers. It reports treating 7.4 million patients in the state each year.

Nationally HCA Healthcare reported $17 billion in revenue for the fourth quarter of last year ending Dec. 31, according to its financial report.

 

Source: News-Press